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Does going beyond income make a difference? Income vs. equivalent income in the EU over 2007-2011

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  • Marko Ledic

    (Faculty of Economics and Business, University of Zagreb, Zagreb, Croatia)

  • Ivica Rubil

    (The Institute of Economics, Zagreb, Croatia)

Abstract

In this paper, we study whether taking into account non-income dimensions along with income while measuring individual well-being matters for cross-country welfare comparisons. We focus on the 27 EU member states over the period 2007-2011, using data from the European Quality of Life Survey. Individual well-being is measured by equivalent income, which is equal to the actual income minus the monetary value of suffering from not having the best achievements in non-income dimensions. Cross-country comparisons of these statistics and their growth rates show that going „beyond income“ makes a substantial difference. In particular, we find that when social welfare is measured by an index sensitive to both mean well-being and its inequality, leaving out non-income dimensions, especially health, from well-being measurement, would leave unexplained more than half of the cross-country variation in social welfare. Taking non-income dimensions into account affects more the part of social welfare that is inequality-sensitive than the one that is mean sensitive.

Suggested Citation

  • Marko Ledic & Ivica Rubil, 2020. "Does going beyond income make a difference? Income vs. equivalent income in the EU over 2007-2011," Public Sector Economics, Institute of Public Finance, vol. 44(4), pages 423-462.
    • Handle: RePEc:ipf:psejou:v:44:y:2020:i:4:p:423-462
    DOI: 10.3326/pse.44.4.1
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    More about this item

    Keywords

    well-being; multi-dimensional; equivalent income; social welfare; non-income dimensions;
    All these keywords.

    JEL classification:

    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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